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Notable Trends in the Mortgage Market

digital lendingThe state of the mortgage market personifies the classic conundrum – is the glass half empty, or half full? On one hand, rising interest rates and a shortage of affordable housing could cool a hot home sales market. And lenders must keep up with regulatory changes and borrowers’ increasing expectations for speed and ease in the lending process. On the other, brighter side, millennials, the largest generation in U.S. history, have now entered peak homebuying years. And with interest rates ticking up, home-equity loans for bill consolidation, construction projects, and other purposes are likely to surge.

Here are some notable trends:  

The Automation and Digitization of the Mortgage Process

The industry is closing in on a completely electronic mortgage experience, from origination to close. Automating processes can keep costs in check, save staff time, and reduce opportunities for error and risk. Automated workflow and integrated optical character recognition solutions that enable text to be captured in electronic formats transform lender processes by reducing clerical tasks.  This allows more time for staff to focus on complex work, such as exceptions, and build relationships with borrowers.

The Multichannel Borrower Experience

Lenders face significant complexities to establish a high functioning customer experience. Borrowers’ preferences may include completing an online application, walking into a branch, reaching out to a call center or using a chatbot. Borrowers won't get up in the middle of a sentence and walk out of a branch, but they will abandon a digital interaction that isn't intuitive or valuable. Lenders must deliver a rich, digital experience that allows applicants to apply, sign disclosures, check status and submit loan conditions.

It’s just as important to provide an intuitive experience for lenders. If mortgage lenders’ jobs are made more difficult by employers’ inability to provide the right tools and solutions, it will be a challenge for lenders to attract or retain top level talent.

The Growing Importance of Data

Starting with a borrower’s first entry into the process – the application – information can now be secured from a data source rather than documents. Financial records from banking accounts can replace statements, pay stubs, W-2 forms and tax returns, and lenders can automate more of the underwriting process.  A large, robust and accurate data set is the precursor to artificial intelligence and machine learning. Creating a clear data strategy, assigning dedicated resources to manage data initiatives and partnering with data-focused technology providers will lay the foundation for coming innovations. Those could include digital assistants and voice banking skills that enable digital banking and payments.

A Compelling Value

Today’s lending environment is competitive and becoming more so as additional nonbank, alternative lenders in the market. Despite this, traditional providers still have the advantage. When choosing a lender, borrowers will often go with who they know. "Recent Expectations and Experiences" research from Fiserv showed that among those who recently applied for a mortgage or a HELOC, 30 percent said prior experience with a lender was an important factor. No matter what the course of the economy and the housing market, lenders will be required to leverage technology to drive down costs and provide a compelling value proposition for homebuyers.

About Author: Lionel Urban

Lionel Urban serves as CEO, founding partner, and chairman of the board for PCLender, LLC. In this role, he is responsible for the overall strategic direction and the vision behind the technology development of the company. Prior to founding PCLender, LLC, he served as co-founder and CEO of Navigator Lending Solutions, Inc. (NavPros), a fulfilment services company specializing in mortgage banking services. Preceding NavPros, Urban was the co-founder, president, and CEO of PCLender.com®, Inc. from 1997 to 2011. During this time, he supervised the development of a pioneering, internet-based mortgage technology platform supporting banks, credit unions, and mortgage companies across the country. Since 1987, he has acquired vast mortgage banking experience in management, origination, operations, secondary marketing, and compliance roles within banks, credit unions, and independent mortgage bankers.
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